USD/JPY ended last week with strong gains and the uptrend has continued today. In the European session, the yen is trading at 148.23, up 0.51%.
Yen slips as BOJ stays the course
All eyes were on the Bank of Japan rate meeting, which wrapped up on Friday. It was business as usual for the BoJ, which maintained its dovish stance. Governor Kuroda said that the BoJ had no plans to raise rates or shift policy “anytime soon”. The BoJ has maintained an ultra-loose policy for years, but there has been speculation that the Bank might make some changes, as the yen has tumbled and inflation is higher than it has been in years. Kuroda’s remarks poured cold water on any such thoughts, as the BoJ remains focused on supporting the weak Japanese economy by means of an ultra-accommodative policy. Clearly, the BoJ has no interest in raising rates to support the yen, although Kuroda paid the usual lip service to the yen’s descent, saying that its rapid fall was “negative and undesirable”. Investors were not impressed and the yen fell close to 1% on Friday.
In the US, the Fed is widely expected to raise rates by 0.75% on Wednesday. Inflation has been falling slightly, but core inflation has been rising, which has put to rest hopes that solid data might induce the Fed to ease up on tightening. The Core PCE index, the Fed’s preferred inflation gauge, rose 5.1% in September, up from 4.9% in August and just shy of the consensus of 5.2%. The Fed continues to view inflation risks as weighted to the upside and is unlikely to ease rates unless it is satisfied that inflation has peaked.